New York Fed President Bill Dudley says senior Fed officials did not accept a conclusion that had been endorsed by frontline Fed examiners stationed at some of the nation’s largest banks.
A committee that includes senior Federal Reserve officials reviewed and overturned a bank examiner's finding that Goldman Sachs lacked a firm-wide policy to prevent conflicts of interest, according to a top Fed official.
Bill Dudley, the head of the Federal Reserve Bank of New York, disclosed the action by the "Operating Committee" in a little-noticed aspect of his testimony last month before the U.S. Senate. Dudley said the panel was part of a new effort by the Fed to raise standards across the board by comparing the practices and health of the nation's banks against each other.
In his testimony, Dudley provided the Fed's most detailed account to date of how it reversed the conclusions of Carmen Segarra, a New York Fed bank examiner who asserted that Goldman lacked the Fed's recommended firm-wide policy to prevent conflicts of interest. Dudley told the senators that the Operating Committee had "fully vetted" Segarra's finding but said "there was this lack of willingness to agree." He said that while he encourages examiners to speak up, their views must be "fact based."
New documents and secret recordings shed more light on the facts Segarra marshaled to support her position. The examiner, for example, compared Goldman's approach to conflicts with that of Barclays and Morgan Stanley. She found that, unlike with Goldman, the policies of both banks were detailed, specific and clearly addressed to the entire firm.
There is a growing sense of frustration among bank customers about the constant, stealthy increase in service charges. Strangely, RBI, the regulator is siding with the bank cartel. Will PM Modi and FM Jaitley pay any heed to helpless bank customers?
This weekend, Prime Minister Narendra Modi and Finance Minister Arun Jaitley along with Reserve Bank of India (RBI) Governor Dr Raghuram Rajan, will meet bankers in Pune at a two-day banker’s retreat. PM Modi is scheduled to interact with bankers on 3rd January. The Retreat would try to achieve a broad consensus on what has gone wrong and what should be done both by banks as well as by the government, among other issues. As usual, in such kinds of meetings, the customer or customer services side of the equation does not feature. It is important for PM Modi and FM Jaitley as well senior officials from Finance Ministry to understand and ask bankers present in the retreat, about the treatment meted out to customers and unfair charges levied by them for banking services. Banks are ripping off customers in a variety of ways: charges on automatic teller machine (ATM) transactions, higher debit charges, SMS alerts (that was a security feature initially), minimum balance requirements, ATM and debit card charges, cheque leaf charges, account closure charges, money transfer charges and so on.
However, so far the government has maintained a stoic silence. The regulator, Reserve Bank of India (RBI) has ignored all appeals and memoranda by consumer organisations, unions and non-governmental organisation (NGOs).
Finally, two lawyers have taken the lead in filing litigation — one in Madurai (Madras High Court bench in Madurai and another at Delhi. The High Courts have taken prima facie cognisance of the issue and issued notices to the RBI and the Indian Banks' Association (IBA). Meanwhile, activist Nutan Thakur and ML Sharma have moved the Allahabad High Court on sale of insurance products by Punjab National Bank. This is also an issue that Moneylife has taken up in the past.
The RBI has decided to back banks’ move to charge for ATM transactions beyond a threshold limit despite protests by consumer organisations and depositors. The RBI has ignored all our memorandums including the one sent jointly with trade unions and other consumer groups. Will Prime Minister Narendra Modi or Finance Minister Arun Jaitley ask bankers about this?
Even on the single point that was accepted out of Moneylife’s memorandum to the RBI, which was regarding the reporting system for non-working ATMs — the RBI has breezily entrusted it to the IBA, which will have minimal interest in setting up a system that will expose their own warts.
An official, writing on behalf of the Governor, said that RBI would ask IBA to “incorporate ways and means through which customers are enabled to report about ATMs which are not in working condition to the banks.”
Is RBI so naïve as to believe that banks do not know which of its ATMs are not functioning or have not bothered to load adequate cash? When the regulator supports a bank cartel by readily accepting their claims about transaction costs without exploring ways to reduce them, what option do depositors have?
First, the stricter limit on ATM transactions applies to six metros, when in fact, the higher number of transactions should lead to lower costs. Secondly, in-bank transactions, which are much more expensive are not being charged—unless RBI plans to permit those too in the near future.
Interestingly, ATM charges were a subject of hot debate at an Open House session by Moneylife Foundation on 22 November 2014, with its new trustees—TS Krishnamurthy (former chief election commissioner of India), Dr KC Chakrabarty (former deputy governor, RBI) and Siddharth Das, COO of Payment Systems at Flipkart.
Dr Chakrabarty, well known for his brutal outspokenness, had said, “I don’t agree with the institutional view of the RBI… on allowing banks to charge for withdrawals from their own banks.” He demolished the claim that customers must pay for services saying, “If banks want to move to a system of transaction fees to be paid by customers, then they must also be prepared to work at very low interest spread. They cannot pay 4% on savings accounts but charge 12% or more on advances and also charge customers for transactions.”
Contrary to RBI’s belief that service quality drives the customer’s choice of banks, most often people are tied to a bank because of salary accounts, scarce lockers, electronic payments for utility bills, credit cards or loans. It is not easy to cut these strings frequently.
As it is, the decision to charge for services that were free till now, like mobile text alerts and higher charges and increase in debit cards fees, has become a source of irritation and discouraged people from maintaining multiple bank accounts. Angry and suspicious customers want to know why nationalised banks continue to expand their ATM networks so rapidly if transactions are unviable.
Moneylife Foundation had pointed out that there is no system in our country to report non-functioning and 'out of order’ ATMs that we as customers see almost every time we want to use it. This makes it necessary for people to hop around and use other bank's ATM that are working. Another crucial issue is the restriction on money withdrawal. If someone needs, let’s say Rs25,000 but the ATM has withdrawal limit of Rs10,000. In this case, the person would end up making all three permitted transactions in one go.
The decision to permit banks to levy charges on ATM transactions is not, in itself, a move that should shatter consumer confidence. But, by choosing to issue a diktat on what should have been a decision by individual a reciprocal service obligation on banks, RBI has ended up signalling that it does not particularly care about the consumer.
Will PM Modi, who often talks about bringing 'achhe din' for common citizens rein in the financial regulator and the bank cartel from punishing own customers by levying variety of charges while enjoying one of the highest spreads on interest anywhere in the world?
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Several fertilizer units have stopped production due to inadequate gas supply from the domestic market. This resulted in India importing over 15 lakh tonnes of fertilizers at higher prices. In such a scenario, setting up of an integrated Coal Gasification-cum-fertilizer and ammonium nitrate complex at Talcher in Odisha is a good news
It may be recalled that effective from October, three urea units in the south, viz, Madras Fertilizers, Southern Petrochemicals Corp (SPIC) and Mangalore Fertilizers and Chemicals, which were using naphtha as a feeder stock, stopped production, as their subsidy was withdrawn. Now further news reveals that, in the case of Deepak Fertilizers, a non-urea maker who was dependent upon gas, also was cut off from supplies since May, by the previous government. There is fear that two other units, Rashtriya Chemicals & Fertilizers (RCF) and Gujarat State Fertilizers may also meet the same fate, if the gas supplies are stopped. All these have resulted in the importation of more than 15 lakh tonnes of fertilizers at the high current level of prices from the international market.
All these could have been avoided, if there was some serious thought to the repercussions that government actions can cause, regardless of whether these were made by the previous or present government. A section of the fertilizer industry has taken up the issue with the Prime Minister, urging him to treat the industry in a fair and equitable manner, seeking relief, under the "Make in India" scheme to ensure that the country becomes self-reliant!
Under the circumstances, in more ways than one, the fertilizer industry got a boost by the announcement of a Joint Venture pact signed by Coal India, GAIL, RCF and the Fertilizer Corporation of India, to set up an integrated Coal Gasification-cum-fertilizer and ammonium nitrate complex at Talcher in Odisha, by 2019.
This was announced recently by Ananth Kumar (Minister of Chemicals and Fertilizers), Dharmendra Pradhan (Minister of State for Petroleum and Natural Gas) and Piyush Goyal, (Minister of State for Power, Coal and New & Renewable Energy). The total cost of the project is estimated at Rs9,000 crore.
Press reports indicate that the upstream venture costing Rs3,000 crores, is to be called GAIL Coal Gas India Ltd and GAIL will hold 35% stake in the same. Fertilizer Corporation of India Ltd will hold 11%m, RCF and Coal India will hold 3% stake each, while the balance of 48% will be given to the technology provider and financial institutions. The name of the technology provider has not yet been announced. In due course, it is possible, that some stake may be sold to retail investors.
It has been mentioned that the upstream project is for converting coal into synthetic gas and the downstream plant proposes to manufacture urea and other fertilizers. The downstream venture, to be called Talcher Chemicals and Fertilzers Ltd will be headed by RCF and Coal India, each of whom will hold a 40% stake, while GAIL and FCIL will take the balance of 10% each. This plant is expected to manufacture 1.3 million tonnes of urea and other fertilizers, details of which are not stated at the moment.
In order to avoid stumbling blocks, two coal blocks have been earmarked for this project; one has been allocated and the other is a standby and kept as reserve. The development work to mine coal in this allocated block must start as soon as possible, so that when the plant is ready, the mine if fully operational.
It is of interest to note that the domestically produced conventional gas is priced at $5.61 per mBtu, while the projected price of gas made from coal will be around $6.5 per mBtu.
Ananth Kumar said that plans are on the anvil to revive the units at Gorakhpur, Barauni, Sindri and Ramagundam. It is would be worthwhile to investigate if one of these sites is selected so that a simultaneous efforts is made to study and set up a similar project, to avoid loss of time. We need the fertilizers, coal is available in abundance and finance can be generated to set up such plants.
In the meantime, for the three plants in the south which were dependent upon naphtha as a feed stock, the Ministry must either direct the suppliers to make these available at export parity price and assure them the subsidy to avoid any further import of urea from the international market.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)